CREA spotlights challenges

CREA spotlights challenges

The Canadian Real Estate Association has released its first report of 2017, highlighting the challenges homebuyers are poised to face this year.

“Canadian homebuyers face some challenges this year, including new mortgage rules that make it harder to qualify for a mortgage and regulatory changes that will push up mortgage financing costs,” CREA President Cliff Iverson said. “It will take some time to gauge the extent to which these challenges will weigh on home buyers in different housing markets across Canada.”

Home sales fell 1.3% in January from December’s total. Sales activity was down in half of all local markets, led by the GTA, Greater Vancouver and Montreal markets.

Inventory continues to be an issue.

“The shortage of homes available for sale has become more severe in some cities, particularly in and around Toronto and in parts of BC,” said Gregory Klump, CREA’s Chief Economist. “Unless sales activity drops dramatically, the outlook for home prices remains strong in places that face a continuing supply shortage.”

The number of newly listed homes fell 6.7% in January – that’s the second consecutive monthly decline. New listings, meanwhile, were down in two-thirds of all markets.

“With the monthly decline in new listings surpassing the decline in sales, the national sales-to-new listings ratio jumped to 67.7% in January compared to 64.0% in December and 60.2% in November,” CREA said in a release. “A sales-to-new listings ratio between 40 and 60 is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets respectively.”

We are now at the point in the price escalation cycle when prospective sellers hold off on listing their property because they believe they will get more next month for it. In many cases, they are probably right - while supply is constrained.

The good news for them is that even if they hold off for a one or two, they will still be able to reap the benefits of the recent escalation in valuation.